Getting started
Being an effective grantmaker starts with deciding what you want to achieve through your awards, before you move on to choosing who to support and how. International philanthropy advisory Bridgespan has identified six steps for grantmaking to steer you through the process. Download the full briefing here.
At every step you will have choices to make. The key to being effective is striking the right balance. For example, if you cast your net too wide at the beginning, you may be overwhelmed by choice, but focus too narrowly, and you will miss good organisations. Moreover, when supporting those you fund, you will need to balance your desire for information about progress and results with the recognition that the time spent reporting to you is taking those you fund away from delivering their core work.
- Sourcing: finding the nonprofits you wish to fund. To find organisations working in your area of interest you can either conduct research and solicit recommendations or you can promote your funding and issue an open call for requests.
- Screening: researching potential grantees. This stage is also called due diligence or grant assessment. Here you are making judgments on the aspects that are important to you such as do they have sound governance practices, strong leadership, a clear strategy, proven results, or a certain ethos?
- Structuring: deciding on the nature of the grants you make. You might want to restrict your grant to a particular area of their work or provide unrestricted support. You will also need to decide the appropriate length and size of any grant. You might think the larger the better but you also will need to be mindful of the impact a very large grant will have on the organisation, especially when it ends.
- Selecting: making the choice to fund a specific nonprofit. This may be your decision or you may involve members of your family or delegate decisions to staff or a panel. You will need clear criteria to ensure you make consistent decisions. The more organisations you consider and the more varied they are, the harder it is to choose between them which is another good reason for a clear focus.
- Supporting: collaborating with grantees to create success. You only make a difference through those you fund so their success is your success. You will need to decide how best you can support them beyond a grant. If you want to be closely engaged, be mindful of their time and the power imbalance (which is always there between fund-seekers and fund-givers) – your involvement should be to add value, for example where you have useful contacts or expertise, and not just about your pleasure.
- Sustaining: deciding on continued funding. You can award repeat grants to organisations that impress or spread your funds to include new nonprofits. What is important is to be clear on the likelihood (or not) of further funding and manage any endings well.
Source: Bridgespan: How Philanthropists Can Think About the Funding Process: The Six Ss of Grantmaking
How to shortlist organisations to fund
The Stanford University Effective Philanthropy Learning Initiative has created an excellent toolkit to provide an introduction to giving effectively. This includes a section about how to identify new grantees. Below is an abridged guide to shortlisting and vetting organisations to fund. You can download the full guide here.
Proactively identifying organisations to fund, rather than reactively responding to miscellaneous funding requests, makes it more likely that you will support organisations aligned with your philanthropic goals. The search process also helps you learn more about the landscape of your focus areas, making your philanthropy more effective.
You will take two main steps to find organisations: seeking recommendations from your networks and researching online.
If you have family, friends, or professional acquaintances with significant experience in your focus areas, consider asking them to recommend organisations that they know of or volunteer with. (Make sure you understand the depth of their experience with their recommended organisations, why they recommend them, and what biases may affect their recommendations.)
You can also seek recommendations from issue-area experts. For example, you may ask a friend who is a human rights lawyer about organisations supporting immigrant rights, or an oncologist about current cancer research. Experienced donors in your focus area are another good source of recommendations.
Professional philanthropic advisors and donor networks can also help you identify effective organisations working in your focus areas.
Many foundations have specialised professional staff who thoroughly vet nonprofit organisations before funding them. Many large foundations share a list of their grantees online. Search for foundations aligned with your philanthropic goals, and then look at their grantees.
A landscape analysis helps you learn about the best research, strategies, stakeholders, organisations, and funders in your focus area. If you have limited time but want to make sure you have a strong grasp of the issue, stakeholders, other donor activity, and policies affecting your interest area, it is common to engage a consultant to create a custom landscape analysis for you.
A landscape analysis can take a few weeks or a few months and generally begins with desk research—internet searches and literature reviews about a field. You (or the consultant) can supplement this by talking to principal stakeholders, including your intended beneficiaries, nonprofits, other funders, scholars, government officials, business leaders, and community members.
Once you have shortlisted organisations you want to fund, you then vet them through the process of due diligence. Due diligence involves assessing an organisation’s legal status, overall health, strategic direction, and programmatic impact. Completing this process thoroughly will enable you to make confident funding decisions.
The section above is a derivative of The Philanthropy Toolkit by the Stanford Center on Philanthropy and Civil Society, copyright 2020 Board of Trustees of The Leland Stanford Junior University, used under Creative Commons Attribution 4.0 license.
You should pay attention to the following seven areas:
- Legal status. Is the organisation registered / licensed by the local authority?
- Organisational history. An organisation’s track record is indicative of its experience in the field.
- Strategy. Effective organisations are clear about their goals and the approach they take toward meeting them.
- Programmes and services. Effective organisations have consistent and complementary programs and are not spread too thin.
- Governance and management. Senior staff should have experience and knowledge relevant to the organisation’s goals. Board members should have the expertise to provide strategic direction.
- Financials. Effective organisations ensure their financial health by managing their budgets efficiently, fundraising from a diversified stream of donors, tracking, and having resources in reserve.
- Monitoring and evaluation. Effective organisations function as learning organisations by tracking program outcomes and obtaining continuous feedback that informs their current and future work.
Potential red flags:
- Not legally registered as a charitable organisation
- Negative press coverage (current or past)
- Repeated changes in organisation’s strategy and vision
- Pursuit of multiple, disparate strategies with limited resources
- Programmes/services are spread across multiple, disconnected issues or focus areas
- No signs of meaningful engagement with the target population
- A series of major changes in leadership (e.g., in the position of executive director, chief executive officer, chief finance officer)
- Board members or significant donors have conflicts of interest
- Board lacks expertise about nonprofit governance or lacks representation from the organisation’s intended beneficiaries
- For organisations with an annual budget over $1 million, no audited financial statements
- Growing deficit or unexplained financial volatility
- Reliance on a single donor or a small group of donors
- No statements or reports on recent work and results
- Reports show no indication that strategies have been adapted to address challenges and lessons from past work
The section above is a derivative of The Philanthropy Toolkit by the Stanford Center on Philanthropy and Civil Society, copyright 2020 Board of Trustees of The Leland Stanford Junior University, used under Creative Commons Attribution 4.0 license.
Effective grantmaking
- Understand your mission and vision. Know what you are trying to accomplish: your mission is your core purpose (why you exist), and your vision is what you’re trying to achieve. These should be established based on your interests, what you’re passionate about (be it climate change or education in conflict), and the needs in the community you are trying to support.
- Assess your capacity to accomplish your mission. Look at the resources that you have in your organisation (people, knowledge, expertise) and determine what gaps you have and need to fill in order to succeed in your mission. You may need to hire more people, undergo training, or even reassess or scale back your mission if you want to remain within your current capacity.
- Determine your funding focus. Figure out what you’re willing to fund, whether it’s broader themes (such as food) or more specific programmes (such as addressing malnutrition in children), and what geographical areas you would like to focus on based on your mission, vision, and most importantly, capacity.
- Determine how you’ll find the organisations to fund. Some foundations have application processes for recipient organisations to submit project proposals for funding, while others prefer to be more proactive in researching and looking for specific organisations they would like to fund based on their preferences. There is no right or wrong way to do this but consider that having a more open approach of accepting proposals from all organisations may give you access to a wider pool of potentially qualified applicants that you otherwise wouldn’t have heard of.
- Create grant strategies. Your strategy, which will drive your funding decisions, should cover certain basic elements such as programme support, core operating support, organisational capacity building and training, research, and multi-year grants.
- Develop grant guidelines. Have a clear set of guidelines that define the grantmaking that you do: how, to who, the purpose of your grants. This will help your applicants and your team understand what your focus is and makes clear what your mission is setting out to achieve. Make sure that it is clear, concise, and straight to the point.
- Get the word out. Make sure that grantees know who you are and how to reach you. This will be based on the fourth point above, and will be especially useful if you’re planning on opening up applications to all organisations and casting a wider net.
- Design a process for proposal review. Figure out what your process will be for proposals you receive. This will include reviewing, vetting, conducting the due diligence, assigning teams, site visits, and other steps that you may wish to consider based on your funding preferences. Make sure that each step is necessary and adds value to your mission, as every step in your process will require time and energy from your grantees and team so you don’t want to take them away from their main purpose.
- Create a process for board review and decision-making. This is linked to the above point and will determine which organisation will receive the grant based on the proposal review. If you don’t have a board, then this step will focus on how you will make your decision and what points will you consider in the application process. Consider what kind of information you or your board will require to make this decision, and how you want to receive it (electronically, physical briefing packet, online presentation).
- Award grants. Establish a routine method for informing grantees of your decision, and make sure it is followed by a legally binding grant agreement that is signed by both sides and outlines the purpose, amount, timeframe, reporting requirements, and terms of the grant.
- Create grant reporting requirements. Again, consider what time and effort you want your grantee to spend away from working on the project you funded. Reporting is extremely important to ensure accountability, assess progress, and measure and document the impact of the grant, but it is also time-consuming and requires resources. So make sure your reporting requirements are appropriate, essential, and kept to the minimum.
Source: Kris Putnam-Walkerly - 11 Essential practices for effective grantmaking.
😐☺✕✓Barriers
Grantmaking is a powerful tool to deliver social change due to its flexibility and ability to innovate. Yet it is not a straightforward practice and sometimes funders can unwittingly create problems for their grantees and even do harm to the communities they are trying help.
In this report, Pro-Bono Economics, a UK-based nonprofit supporting charities and social enterprises improve their impact, outlines the common issues, and suggests ways to overcome them.
The three key barrier are outlines in
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Short-termism in the length of time for which grants are offered, leads to uncertainty and inefficiency among grant-seekers, alongside a tendency to prioritise narrowly conceived projects in the present over investment in an organisation’s ability to develop and deliver its mission in the longer term.
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Sub-optimal processes including expensive and cumbersome application and monitoring processes that directly reduce the value of funds, but also more strategic factors such as determining where and how to direct funds, meaning that funding does not always go to where it can have the most impact.
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Reproduction of wider social inequalities, meaning that some groups disproportionately suffer the consequences of problems in the system, resulting in funding not always getting to those who most need it.
Source: Pro Bono Economics - Making it count: overcoming the barriers to better grant-making
Trust-based philanthropy
At the core of trust-based philanthropy is a shift in mindset and power. Traditional grantmakers are criticised for taking a ‘funder knows best’ approach. This might include dictating the desired impact, designing a process to judge who best fits and then asking funded organisations to prove their impact. In contrast, starting from a position of trust, means respecting nonprofits, recognising their expertise and allowing them to be involved in programme design.
Trust-based philanthropy has hit the headlines in recent years in part due to US philanthropist MacKenzie Scott, who - as of December 2022 - had awarded in excess of $14 billion to more than 1,600 nonprofits in just three years. Instead of inviting organisations to apply for grants and then put them through rounds of time-consuming grant application paperwork to qualify, Scott deployed a team of advisors - at her own expense - to identify and assess impactful organisations.
She then awarded grants with no strings attached – trusting the nonprofits to use the money wisely to achieve their charitable purpose. In some cases, organisations had no idea they would be receiving funding until the money came through. More details about MacKenzie Scott's philanthropy can be found here, where she lists all her "gifts" (as she calls them).
Six ways to do trust-based grantmaking
- Give multi-year, unrestricted funding. The work of nonprofits is long-term and unpredictable. Multi-year, unrestricted funding gives grantees the flexibility to assess and determine where grant dollars are most needed, and allows for innovation, emergent action, and sustainability.
- Do the homework. Oftentimes, nonprofits have to jump through countless hoops just to be invited to submit a proposal. Trust-based philanthropy moves the onus to grantmakers, making it the funder’s responsibility to get to know prospective grantees, saving nonprofits’ time in the early stages of the vetting process.
- Simplify and streamline paperwork. Nonprofits spend an inordinate amount of time on funder-driven applications and reports, which can distract them from their mission-critical work. Streamlined approaches focused on dialogue and learning can pave the way for deeper relationships and mutual accountability.
- Be transparent and responsive. Open, honest, and transparent communication supports relationships rooted in trust and mutual accountability. When funders model vulnerability and power-consciousness, it signals to grantees that they can show up more fully.
- Solicit and act on feedback. Philanthropy doesn’t have all the answers. Grantees and communities provide valuable perspectives that can inform a funder’s strategy and approach, inherently making our work more successful in the long run.
- Offer support beyond the cheque. Responsive, adaptive, non-monetary support bolsters leadership, capacity, and organisational health. This is especially critical for organisations that have historically gone without the same access to networks or level of support than their more established peers.
Source: The Trust-based philanthropy project, a peer-to-peer learning and advocacy initiative to make trust-based practices the norm in philanthropy.
Grantmaking in a crisis
Crisis philanthropy requires a different mindset to regular grantmaking. Time matters, but while decisions need to be taken quickly, they should not be haphazard because ill-conceived emergency funding can do more harm than good by negatively affecting local markets and suppliers, duplicating existing help, and in some cases, creating dependency in place of resilience.
Needs in a crisis are vast and varied. Affected communities require support in many areas and there are many ways your funding can help, from paying for emergency shelter and food supplies, to providing water, medicine, and psychosocial support.
In crisis situations, it is more often than not local organisations, civil society groups, or religious entities that are the first to respond. It is also likely that it is going to be these smaller, local responders who will be contracted by UN agencies and INGOs to deliver the programmes they are promoting on their global fundraising pages.
Giving directly to these organisations cuts out the middlemen. It can help get money to where it is needed most and it is a way that philanthropists can empower communities to respond to their own challenges in their own way, without forcing them to be dependent on external aid.
But funding locally comes with risks and it is not as easy as it looks on paper. It is also important to futureproof your funding by thinking about long-term needs of the communities you are trying to help.
Between 1989 and 2011, the Conrad N Hilton Foundation awarded some $21.6m to support relief and recovery programmes at home and overseas, responding to cyclones, earthquakes, fires, floods, hurricanes, tornadoes, and tsunamis, as well as and other tragedies including the Oklahoma City bombing and the September 11 attacks.
Philanthropic Grantmaking for Disasters, a report commissioned by the foundation looks back on its own crisis philanthropy and considers the lessons it learned along the way. It also reviews principles, best practices, and codes of conduct for humanitarian assistance, including disasters. Although published in 2012, the report remains a useful resource and also includes a best practice checklist, which can be applied to all grantmaking situations.
Download the full report here and for more about crisis philanthropy, see Giving in an emergency, a page of resources curated by Circle.
Ending programmes and funding relationships
Whether you are a grantmaking foundation, a family foundation that runs its own programmes, a big corporate grantmaker, a small venture philanthropist, an NGO that regrants funds from a back-donor or a mix of any of the above: exits are inevitable. Funder exit decisions and strategies bring together a lot of elements.
This guide from Grantcraft (now Candid Learning for Funders) outlines some recommended practices.
- Look before you leap. You can prevent unhappy exits by being honest and rational about why you enter a partnership. Many unhappy exits seem to come from flawed decisions to enter a field or a relationship, from decisions that are based on incomplete or biased information or on emotional interpretation of information. The philanthropist has an obligation to “do no harm”, and dilemmas regarding collateral damage of exits are all the more pressing when there was no rational decision to engage in the first place.
- Be prepared. Everyone can do what a particular board member of a spend-out foundation suggested to their executive team, which was asking them to write the organisation’s obituary. Nailing down what you really want to leave behind can help you in turn to identify what the true sense of your funding and legacy is.
- Think sustainability early on. So what do you leave when you exit? Do you seek something that needs to last? What has to actually remain over time? You have to make sure that all partners share this expectation and that what you provide and fund is helpful to achieve that. When considering support, a funder has to reflect on this and table it in conversations with grantees and partners at the start.
- Talk timelines. Not every foundation needs an official policy or a plan as to how long a partnership will last, or what criteria are used for exits. It all depends. But it seems to be practical wisdom to talk at any − and possibly every − stage of the relationship with partners about timelines: both your timeline and theirs. Embracing the concept of exits, the temporary nature of the relationship may help to shed anxieties and communicate honestly. At the same time, such dialogue about timelines should not be an on-going threat to exit… C’est le ton qui fait la musique.
- Manage irrationalities in relations. If you want your charities, your partners, or a field you intervene in to become sustainable and independent, you need to give the actors space and freedom. But can you let go? As a funder, can you deal with grantees and partners that are assertive? You have to find the right degree of involvement. Distant trustees may want to withdraw too rapidly, while those who are closely involved or who helped build the relationship may not find it easy to let third parties come in and play a role. Foundation managers have to be aware and manage the emotions and irrationalities involved in philanthropic relations with wisdom.
- Reflect, be patient and realistic. All too often exits come out of nowhere. Some venture philanthropy foundations review their portfolios on an annual basis to decide either to continue, to withdraw, or to scale up. They want to avoid investing long term in models or organisations that do not work, cannot generate revenue, or are unable to diversify their funding base. When they withdraw, they normally take 12 months to exit. When a model or organisation seems to work they will look for the patient investors that it deserves. Not all these parameters apply to all types of philanthropy, but regular reviews, in which information from different sources is triangulated, seem helpful and may prevent rushed or crash exits.
- More than money. As a funder, your relationship with your partners probably involves much more than money. This can be part of your intervention model (for example when you practise venture philanthropy) or less deliberate. Ensure this non-financial contribution aspect is also part of your exit considerations. Consultations with partners you exit from should draw out these non- monetary needs. If this aspect was already built into your partnership, you may be able to continue to play a role. If not, broker with others to ensure needs are catered to. Sometimes there simply is no more funding, but you can still draw on your non-monetary assets to add value to the work of your (former) partners.
- Communicate, communicate, and communicate. Once you have taken an exit decision, you need to communicate. Take your time, use a variety of channels, ensure a unified message, ensure that the hierarchy takes its responsibility, repeat yourself, and do not assume that your messages will be easily absorbed and processed: “Tell them what you will tell them, tell them, and tell them what you told them,” encourages a seasoned practitioner.
- Revisit and learn. Only rarely do funders go back five or more years later to revisit former grantees or partners to look back at the exit process and see what remains after the exit. It may not be a bed of roses, yet those who have done this have found it to be an enlightening and inspiring exercise.
Source: Grantcraft -Ending programmes and funding relationships.
Further reading
Five ways to be a better funder
Grantmaking is not easy and good grantmaking is even harder, write Gemma Bull and Tom Steinberg, the co-authors of Modern Grantmaking. In this piece for Circle, they outline five ways to be a better funder: Humility; equity; evidence; service; and diligence.
The Covid-19 pandemic turned many traditional grantmaking practices upside down and forced donors to move faster, trust the leadership of the people they were funding, and reduce pre- and post reporting requirements. Borealis, a US-based social justice philanthropic intermediary working to resource grassroots movements for transformative change, is just one organisation that changed its approach due to Covid-19. Read this article to find out how.
How philanthropy can help lead on data justice
The Stanford Social Innovation Review (SSIR) takes a look at how data is collected and used in a grantmaking context. It dissects the relationship between grantmakers and the community and advocates for community-based participatory research and a more equitable approach to data collection and ownership for greater impact.
Designing Partner-Centered Grantmaking Processes
Putting the people affected by the conflict at the centre of your grantmaking or philanthropy is a key step to achieving more equity in your giving. This article from Candid talks about “design thinking” as a method that philanthropists and foundations can use to ensure they are genuinely and intentionally supporting their grantee partners by keeping their wellbeing, interest and experience at the centre of process when designing or shaping their interventions and grants and doing it with empathy.
